Bitcoin is still under some downside pressure after the sharp decline last week, bringing it down to the area of interest in a new descending channel forming. A break below the $3,600 level could bring in more losses.
However, the 100 SMA is still above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. This suggests that there may be a chance for buyers to take over. Then again, the gap between the indicators is narrowing to signal weakening bullish momentum and a potential downward crossover.
If so, more sellers could pile on and take the price all the way down to the very bottom at the $3,000 mark or the previous year lows around $3,200. Stochastic is already indicating oversold conditions, though, which suggests that sellers may be exhausted and willing to let buyers take over.
Similarly, RSI is indicating oversold conditions and is turning higher to signal a pickup in bullish momentum. In that case, a bounce to the top of the channel around $4,000 may still be possible.
The inability to break past the nearby resistance levels likely led bulls to drop their positions towards the end of the previous week, and the break below the $4,000 handle signals that selling pressure is returning.
It seems that the gains early in the year were mostly driven by optimism, but traders had been holding out for more conclusive evidence that the industry is making progress. There have been a few minor developments but none of these seemed enough to sustain any gains.
Still, many analysts believe that the dip is just a short-term correction and that the price has been able to bottom out from the previous year’s slide. Key levels to watch are $3,600 as near-term support and the $3,200 lows as an indication of whether another bottom might still be in the works or not.
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